Jim Beam

The Louisiana House passed a major tax reform bill late Wednesday and approved a companion measure Thursday after it fell four votes short of the 70 (two-thirds) needed a day earlier.

Rep. Stuart Bishop, R-Lafayette, and chairman of the House Ways and Means Committee is sponsor of both measures. House Bill 278 lowers existing individual income tax rates. HB 274 is the companion constitutional amendment that would be decided by the state’s voters on Nov. 8, 2022.

The tax rate measure was approved 70-24, the exact two-thirds support needed. The proposed constitutional amendment’s second vote Thursday was 98-2.

The proposed tax changes, if eventually approved, would become effective Jan. 1, 2023.

Current law levies an income tax of 2 percent on the first $12,500 of an individual’s net income, 4 percent on the next $37,000 of net income and 6 percent on the net income in excess of $50,000. Those monetary amounts are doubled for couples.

Bishop’s legislation would reduce the 2 percent to 1.85 percent, the 4 percent to 3.5 percent and the 6 percent to 4.25 percent. Those lower income tax rates would begin on Nov. 1, 2024, and on each Nov. 1 thereafter.

The current state constitution allows taxpayers who itemize on their state income tax forms to deduct federal income taxes paid and excess federal itemized deductions. If voters approve the companion constitutional amendment, taxpayers would only be able to deduct excess federal health care expenses on their state income tax forms.

Eliminating those deductions will make the two bills revenue-neutral, which means the state wouldn’t receive any higher or lower income tax revenues.

Bishop told his House colleagues having a simplified tax system with lower tax rates would boost economic development. He said if President Joe Biden and Congress raise taxes, which is being considered, the state would lose revenues because of those federal tax deductions.

The two tax reform measures have been supported by the Louisiana Association of Business and Industry, the National Federation of Independent Businesses and the Public Affairs Research Council of Louisiana.

Rep. Mark Wright, R-Covington, got the House to add an amendment to HB 278 that would reduce the income tax rates even lower after 2025 if tax revenues exceed projections.

Wright said his amendment is modeled after what North Carolina did on tax reform that proved so successful. However, Rep. Barry Ivey, R-Central, said North Carolina had a flat tax while Louisiana still has three tax rates.

Members of the Legislative Black Caucus voted against both tax reform bills Thursday but supported HB 274 Thursday. Jan Moller, executive director of the Louisiana Budget Project, said the tax reform measures don’t raise more revenue and don’t address the inequality in the state’s tax system.

Moller said poor residents pay a higher percentage of their income in taxes. The Wright amendment would result in higher income taxpayers getting additional income tax reductions.

The House voted 91-2 for Senate Bill 159 by Sen. Bret Allain, R-Franklin. It is a constitutional amendment that reduces the current maximum allowable 6 percent individual income tax rate to 4.75 percent.

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